The Ministry of Corporate Affairs (MCA) has imposed a hefty penalty of INR70 million (USD840,000) on the startup fundraising platform Planify Capital and its directors for breaching provisions of the Companies Act, 2013.
The penalty follows violations related to the private placement of shares, where Planify Capital unlawfully utilised its online platform to sell shares of unlisted companies to investors.
An MCA investigation found that Planify Capital breached section 42(7) of the Companies Act by issuing shares on a private placement basis but using its online platform, the Planify Platform, for share issuance.
Additionally, the company failed to file form PAS-3 for the issuance of shares to 76 investors, as required by the Companies (Prospectus and Allotment of Securities) Rules, 2014.
During the investigation, it was revealed that Planify Capital initially sold shares to Planify Enterprises, a group company managed by the promoters of Planify Capital. Subsequently, Planify Enterprises transferred the shares to 76 investors through the Planify Platform, effectively making them shareholders of Planify Capital.
The MCA observed that the Planify Platform served as a distribution channel for Planify Capital to inform the public about share issuance. Despite issuing shares to Planify Enterprises initially, the real intention was to attract potential investors through the Planify Platform, effectively violating section 42(7) of the act.
